- What Are the Tax Consequences of Inheriting a CD?
If you inherit or plan to bequeath a certificate of deposit (CD) as part of your estate, there may be tax consequences to consider. Three kinds of taxes could apply: income, estate and inheritance. While the principal amount of the CD transfers without income tax issues, any interest earned after death and before transfer will… read more…
- How Capital Gains Tax on Home Sales Works
If you sell your home for a profit, the IRS considers this a taxable capital gain. This rule applies to all home sales, including vacation or investment properties. However if you sell your primary residence, you may be able to exclude $250,000 of gain per individual from your taxes. As a result, in most cases,… read more…
- Can Short-Term Capital Losses Offset Long-Term Capital Gains?
Whether you’re a novice making your first investment or an experienced investor managing a diverse portfolio, understanding capital gains and losses is fundamental for anyone who invests. Savvy investors may strategically count long-term losses against their long-term gains, eliminating or reducing their tax liability. This begs the question: can short-term losses offset long-term gains in… read more…
- Are Health Insurance Premiums Tax Deductible When You Retire?
Health insurance premiums can be tax deductible when you retire, but it depends on several factors such as your age, the type of health insurance plan that you have and whether you are self-employed or not. Even medicare premiums can be tax deductible if you qualify, so it’s just as important to have a tax… read more…
- I’m Going to Get $3,300 per Month From Social Security. How Can I Reduce My Taxes?
Approximately 40% of households pay taxes on their Social Security benefits, according to the Social Security Administration. If you do owe taxes on your benefits, managing them effectively could save you a lot of money. If you need help planning for Social Security or taxes in retirement, consider working with a financial advisor. However, there… read more…
- What Are the Tax Implications for Withdrawing From Your IRA?
Managing your retirement savings effectively requires understanding the tax implications of withdrawing money from an individual retirement account (IRA). IRAs, whether traditional or Roth, offer unique tax advantages that can significantly impact long-term savings. However, understanding how withdrawals are taxed, the conditions under which penalties apply and the strategic maneuvers available to minimize financial strain… read more…
- How to Report Foreign Gifts With Form 3520
The IRS has clear guidelines and specific thresholds that dictate when and how U.S. persons (citizens, resident aliens or domestic trusts) must report gifts from foreign entities. With penalties for non-compliance potentially reaching staggering amounts, understanding these rules is not just a matter of financial literacy but of fiscal responsibility. If you receive a gift… read more…
- I’m Selling My House and Netting $480k. Can I Avoid Taxes While Downsizing for Retirement?
In most cases, when selling your primary residence you can exclude $500,000 of the gain if you file as a married couple. If that’s your situation, and you meet conditions to have the gain qualify as a long-term capital gain, you likely won’t owe any tax. If you file singly while still meeting long-term capital… read more…
- How to Avoid Overpaying Your Taxes
Getting a tax refund can seem like a financial windfall, but it means you’ve overpaid your taxes and given the government an interest-free loan. While some taxpayers prefer to receive a lump sum refund, others view tax overpayments as a missed opportunity to have their money work for them. That’s because the extra money paid… read more…
- What Are the Imputed Interest Tax Rules?
Imputed interest rules can turn even a simple act of generosity into a taxable event. This IRS regulation requires interest to be calculated and reported on certain transactions, even if no interest is explicitly stated. The regulation aims to ensure fair taxation on transactions involving deferred payments or below-market interest rates. As tax laws continue… read more…
- 1031 Exchange Rules in California
Selling an underperforming asset and buying a similarly priced, more promising investment is a logical business move – but what about the taxes on the sale? If you’re an investor in California, concerns might arise over the taxes you’ll owe for selling an investment property. Fortunately, the 1031 exchange rules from the federal government allow… read more…
- What Is a Gift Loan and How Does It Work?
A gift loan is essentially a loan with an interest rate well below the market average, or even no interest at all, which can be a strategic way to support family members financially or for estate planning purposes. As beneficial as these loans may appear, with their potential tax benefits and flexible repayment options, they… read more…
- How to Set Up a Payment Plan for Taxes You Owe
When an individual or business owes taxes to the Internal Revenue Service (IRS), settling the entire amount in a single payment may not be financially feasible. In such cases, a tax payment plan can offer a viable solution. This arrangement with the IRS allows taxpayers to pay their due taxes over an agreed period, easing… read more…
- How to Report a Backdoor Roth IRA With Form 8606
A backdoor Roth IRA typically offers high-income earners a workaround to contribute directly to a Roth IRA when their earnings are above IRS income limits. This strategy could allow you to take advantage of tax-free growth and withdrawals in retirement. Reporting a backdoor Roth IRA contribution on your taxes is relatively straightforward. But doing it… read more…
- What Is Net Investment Income and How Is It Taxed?
Net investment income (NII) is defined as the profit gained from investments after deducting certain related expenses. This includes various forms of income such as interest, dividends, rental income and capital gains. It’s essential to know not just what comprises NII, but also how it’s calculated and the tax implications it carries, especially for those… read more…
- Understanding Form 8606 for IRA Taxes
If you use an IRA to save for retirement, IRS Form 8606 might be an important part of tax season. Specifically, this is the form on which you report nondeductible contributions to an IRA. It is also used to track distributions for households that have made nondeductible contributions, early distributions from Roth IRAs, and conversions… read more…
- 9 Common Tax Mistakes and How to Avoid Them
The more money you make, the higher your tax liability could be. And making a mistake in your filing can end up costing you more in fees and penalties. Here’s a roundup of common tax mistakes that could cost you money this tax season. A financial advisor who specializes in tax planning could also help… read more…
- Tax Implications for Reverse Mortgages
A reverse mortgage can be a useful way to access the value of your home without having to sell it. This is a form of lending intended for, and typically restricted to, older households. That said, it’s important to be very careful with this product. Reverse mortgages are more complicated than frequently advertised, and could be… read more…
- How to Make a Charitable Gift From Your IRA
Each year, you can make a tax-free charitable gift from your IRA or certain other pre-tax retirement account. This is known as a qualified charitable distribution or a QCD. These distributions allow you to meet your annual required minimum distribution without paying taxes on that amount. To do so, you must transfer the assets from your… read more…
- Tax Deferred vs. Tax Exempt Retirement Accounts
The most common form of retirement account is tax-deferred. This refers to portfolios which allow untaxed contributions and gains during your working life, but which require you to pay income taxes on any money you withdraw in retirement. Other portfolios are known as tax exempt. But this is inaccurate, as the IRS does not offer… read more…
- What States Have a Flat Income Tax?
While the federal government applies a consistent tax system to every citizen, states have tax rates they set independently from Uncle Sam. States can apply flat taxes, graduated taxes, or no taxes to their residents. If you don’t know about your state’s current income tax system, finding out can help you compare how much you… read more…
- Tax Credits You Can Use to Reduce Your 2024 Taxes
Tax season has arrived, and when it comes to preparing your return remember this: deductions are good, but tax credits are better. Anyone who’s paid taxes knows the value of deductions, which reduce the amount of your tax bill at your marginal tax rate. If you’re in the 22% federal tax bracket and you deduct $2,000 in… read more…
- Do I Have to Worry About Taxes if I Loan a Family Member $45,000?
It’s common for family members to lend money amongst themselves, and many choose to charge less than market interest rates as a favor to loved ones. However, the IRS does care about these transactions so there are some things to think about as you’re planning such a loan. While the IRS does afford a break… read more…
- I Worked Two Jobs in 2023. Can I Get a Tax Credit for Paying Too Much in Payroll Taxes?
If you paid Uncle Sam more than his fair share in payroll taxes in 2023, you may be owed a refund. In 2023, you would have paid a combined 7.65% in payroll taxes on all employment-based earnings up to the annual limit. But if you worked two relatively high-paying jobs, there’s a chance that a… read more…
- Five Medical Expenses You Can Deduct on Your Taxes
Taxpayers can deduct medical expenses by itemizing them on their taxes. However, these deductions may be out of your reach as the current standard deduction is high. In 2024, the standard deduction is $14,600 for individuals and $29,200 for joint filers. Therefore, taxpayers generally itemize deductions if the total amount is greater than the standard… read more…